What’s the value of financial planning and is it really worth it?

Even if you already work with a financial planner, it’s natural to occasionally question the value of their services.

Perhaps you think you could do what they offer on your own, or maybe that you don’t quite have enough in the bank to warrant financial planning.

However, while it might not suit everyone, the evidence is clear that financial planning can deliver substantial value over time. And, contrary to the common misconception that it’s only for the super-wealthy, research shows that financial planning can be particularly beneficial for clients at the lower end of the income spectrum.

So, whether through budgeting, saving, or investing, a financial planner can help you define and achieve your long-term goals, regardless of your starting point.

Read on to find out how much financial planning can cost and whether it is really worth it.

The costs of financial planning vary and there are different ways you might be charged

Of course, the value of financial planning is closely linked to the costs. Generally, there are three ways a financial planner will charge for their services, and while the costs vary widely, there are averages for each.

Charges as a proportion of the money invested

Most financial planners typically charge you a fee based on a percentage of your investment. According to Which?, the average cost for initial advice is around 2.4% of the amount you invest, with ongoing advice typically costing about 0.8% a year.

Flat fees

Some financial planners charge a one-off fee that covers everything from gathering your information to implementing a tailored plan.

Unbiased reports that one-off independent advice on your financial situation typically costs between £1,700 and £2,500. You may also be charged an initial fee for recommendations, with a flat annual fee for reviews or for each additional service provided.

Hourly fees

Hourly fees are straightforward and transparent, but be cautious, as they can quickly build up if not carefully managed.

They can range from anywhere between £30 to £250, with the average hourly cost in 2023 being £196, according to the Which? report.

Financial planning can be valuable over time

There are several studies into the long-term benefits of financial planning. While the specific results vary, they are all clear that financial planning has the potential to offer considerable returns over time.

For instance, a 2019 report by Russell Investment revealed that by advising beyond just investments, on matters such as tax and estate planning, financial planners can add at least 4.4% of value to clients every year.

Moreover, Unbiased reported a study showing that individuals who used a financial planner were, on average, nearly £48,000 better off in pensions and financial assets over a decade compared to those who did not.

The advantages were particularly noticeable for individuals with lower disposable incomes and for those who sought advice multiple times. Over a 10-year period, the combined benefits of professional advice translated into returns approximately 2,400% greater than the initial cost.

Furthermore, the report notes that the study only considers a decade. However, the timescale of advice is generally longer than this as you build up your pension pot over the course of your career, which could be 40 years or even longer.

So, as well as the considerable benefits shown over a decade, the value of financial planning could be significantly greater over longer periods of time.

Get in touch

To find out more about the value of financial planning and how it could benefit you, get in touch.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.